Cruise benefits under study

Jul 2, 2002 8:05 AM

It’s decision time for the Indiana riverboat operators: should they continue to cruise and pay just 22.5% of their revenues in taxes or should they remain dockside and be taxed on a sliding scale that tops off at 35%.

Almost since Indiana approved riverboat gaming, the ­­license holders have been begging politicians for the right to remain docked while continuing to offer their products. More recently, they faced greater competition from the Illinois riverboats which were granted permission to conduct their business without cruising.

In a special session of the Indiana legislature, called to ­­attempt to balance the state’s budget, the lawmakers granted the boats the right to remain in their berths.

But, the dockside exemption came at a price. Higher taxes.

Rob Stillwell, Boyd Gaming Corp.’s (BYD) vice president for corporate communications, summed up the problem for all operators. "We’re evaluating the new law right now," Stillwell said, adding that the companies must weigh the benefits against the costs. Boyd Gaming operates the Blue Chip Casino in Michigan City, near the lucrative Chicago, Ill., market.

Also being reviewed is the admission tax levied by the state on each patron who participates in a two-hour cruise. The $2 tax will be hiked to $3 under the new plan but it appears that the patron would pay the admission just once regardless how long he stays on the boat to gamble.

Although the tax rate rises dramatically for dockside, it is anticipated that the larger operators such as Argosy Gaming Corp. (AGY) and Harrah’s Entertainment Inc. (HET) will more than offset the additional levy with substantial increases in revenue. As Robin Farley, chief gaming analyst for UBS Warburg, pointed out, the revenues for Illinois riverboat jumped 31% when that state permitted them to discontinue cruises.